Commitments and Contingencies

12 Months Ended

Feb. 02, 2013

Commitments and Contingencies

Commitments and Contingencies

6.     Commitments and Contingencies

• Operating Leases

        Cherokee leases the current office building under an operating lease expiring on November 1, 2016. The Company also has one five-year option to extend this lease for a total of 5 additional years, to November 1, 2021.

The Company also leases an office in Minnesota under an operating lease expiring on March 15, 2018. There is one three-year option to extend this lease for a total of 3 additional years, to March 15, 2021. The Company also leases copiers and printers for these two offices under operating leases. The future minimum non-cancelable lease payments are as follows:

(amounts in thousands)	Operating Leases
Fiscal 2014		375
Fiscal 2015		351
Fiscal 2016		359
Fiscal 2017		247
Fiscal 2018 and thereafter		31
Total future minimum lease payments		1,363

        Total rent expense was $0.3 million for Fiscal 2013 and $0.2 million for both Fiscal 2012 and Fiscal 2011. Total operating lease expenses, excluding rent, was $0.1 million for Fiscal 2013, $0.09 million for Fiscal 2012 and $0.08 million for Fiscal 2011, respectively.

• Early Termination of Former Office Lease

        On December 7, 2011, and in anticipation of the Company's relocation of its headquarters, the Company entered into an early termination agreement with Lorenz Bondy et al Partners, the former landlord, with respect to the termination of the Company's former lease obligations regarding the former corporate offices located at 6835 Valjean Avenue, Van Nuys, CA 91406. In connection with such termination, the Company negotiated for, and paid, an early termination payment amount that was less than the amount that the Company would otherwise be required to pay under the Company's former lease agreement.

• Promissory Notes

        Under the terms of the Separation Agreement with the Company's former executive chairman, on January 28, 2011 the Company irrevocably agreed to repurchase 400,000 shares of common stock from Mr. Margolis, and his affiliates, at a per share price of $18.15, or $7.3 million in total. The Company consummated the repurchase on February 7, 2011, and issued promissory notes to affiliates of Mr. Margolis as consideration for the repurchase. On February 17, 2011, the Company repaid the promissory notes in full.

• Trademark Indemnities

        Cherokee indemnifies certain customers against liability arising from third-party claims of intellectual property rights infringement related to the Company's trademarks. These indemnities appear in the licensing agreements with the Company's customers, are not limited in amount or duration and generally survive the expiration of the contracts. Given that the amount of any potential liabilities related to such indemnities cannot be determined until an infringement claim has been made, the Company is unable to determine the maximum amount of losses that it could incur related to such indemnifications.

• Litigation Reserves

        Estimated amounts for claims that are probable and can be reasonably estimated are recorded as liabilities in the consolidated balance sheets.

The likelihood of a material change in these estimated reserves would be dependent on new claims as they may arise and the expected probable favorable or unfavorable outcome of each claim. As additional information becomes available, the Company assesses the potential liability related to new claims and existing claims and revises estimates as appropriate. As new claims arise or existing claims evolve, such revisions in estimates of the potential liability could materially impact the results of operations and financial position. The Company is also involved in various other claims and other matters incidental to the Company's business, the resolution of which is not expected to have a material adverse effect on the Company's financial position or results of operations. No material amounts were accrued as of February 2, 2013 or January 28, 2012 related to any of the Company's legal proceedings.

        A former employee has retained counsel and threatened to sue Cherokee for, among other things, wrongful termination of their employment. Cherokee believes the claims are without merit and intends to defend itself vigorously against any suit brought by the former employee.

• Other

        As part of the acquisition of Liz Lange and Completely Me by Liz Lange, the Company agreed to assume the seller's obligations under various agreements, which included a consulting agreement with Liz Lange.